Tuesday, November 30, 2010

Sri Lanka stocks close up 2.8-pct

Nov 30, 2010 (LBO) - Sri Lanka stocks closed sharply higher Tuesday, bouncing back a day after the regulator extended a deadline for brokers to clear credit given to clients, brokers said.

The All Share Price Index closed at 6,434.85, up 2.8 percent (177.84 points) while the Milanka index of liquid stocks rose 2.50 percent (170.37 points) to close at 6,988.54, according to Colombo Stock Exchange (CSE) provisional figures.

Turnover was 4.8 billion rupees. There were 202 gainers and 21 losers.

"A lot of interest was seen in the banking, manufacturing and hotels sectors," Rakshitha Perera of Bartleet Mallory Stockbrokers said.

"There was institutional, high-net-worth individual as well retail participation with stocks recovering across the border, he said.

Among banks Sampath Bank closed at 260.80, up 11.90 rupees, Commercial Bank closed at 267.50, up 4.30 and DFCC closed at 200.00, up 3.20 rupees.

Seylan Bank closed at 95.30, up 6.40 with 12 million shares being traded.

Banks were among the biggest gainers this year, on expectations that taxes would come down after the budget. Though taxes did come down, the savings are expected to be put in a special fund subject to government directed lending.

The Securities and Exchange Commission Monday said the December deadline to clear credit to clients has been extended to June 2011, with 50 percent of the credit to be cleared by March.

"We are encouraged by the September 2010 quarter performance and remain positive on the direction of the CSE. Only the CSE has been more ‘credit dependent’ than we would have liked to see," Nikita Tissera, S C Securities said.

John Keells Holdings closed at 298.80, up 6.20 with 1.1 million shares traded. (Ends)

source - www.lbo.lk

Sri Lanka Malaysia hydro firm in Rs600mn IPO

Nov 30, 2010 (LBO) - Panasian Power Limited, a unit of Malaysian based Majulia group is selling 200 million shares to raise 600 million rupees in an initial public offering which will open on December 07, officials said.
Majulia owns the firm through its energy unit, Power Hub International (PHI).

Panasian Power owns a 2.0 MegaWatt mini-hydro plant in Sri Lanka's Ratnapura district and has a power purchase agreement with state-run Ceylon Electricity Board which runs till July 2019.

Panasian has consistently generated more than 10 GigaWatt-hours (millions of units) of energy a year since 2005 at a plant factor of more than 60 percent, which officials say is the second highest in the country.

The plant factor measure the actual output against the total possible in a period, with the plant running at full capacity.

In 2009 the plant has generated 10.7 GWh of energy (61.3 percent plant factor), in 2008 11.2 GWh (61.1 percent plant factor).

Up to September 2010, the firm has generated 7.7 GWh of energy.

The firm is paid on the so-called 'avoided cost' formula which is based on the thermal costs of the CEB. Director Rifky Badurdeen says in the past the price has risen about 5.0 percent a year.

The CEB is however commissioning a coal plant which will generate power at 8.04 rupees a unit but officials says they do not expect tariff reductions in the near future.

In the year to March 2010 it has earned 118.0 million rupees and profits of 77.9 million rupees. Panasian has a tax holiday running till 2017/2018.

Director Deepal Sooriyaarachchi says firm has received preliminary approval from the CEB to increase the plant's output by one MegaWatt to 3.0 MW.

Director Rifky Badurdeen says the firm is hoping to sign an enhanced power purchase agreement within three months.

Panasian's newly acquired subsidiary Mawanella Power with a 2.4MW plant has a lower plant factor. In 2009 it has generated 4.7GWh of energy at a plant factor of 22.4 percent.

In the first six months of 2010 the plant has generated 5.0GWh of energy at a plant factor of 32.7 percent.

In the year to March 2009 the firm has earned 34 million rupees in revenues and lost 45 million rupees.

In the year to March 2010 the firm earned 70.9 million rupees in revenues and 20.1 million rupees in profits, with interest costs falling to 10.2 million rupees from 34 million rupees. It has a tax holiday till 2013/14.

The plants are currently paid 11.07 rupees during the so-called 'wet season' and 11.94 rupees during the 'dry season', under the formula.

After the issue, the parent, Panansian Power will have 500 million shares indicating earnings per share of 19 cents last year.

source - www.lbo.lk

Sri Lanka shares to go electronic

Nov 30, 2010 (LBO) - Sri Lanka's markets regulator plans to make all shares of listed firms scripless by converting all paper-based physical share certificates into electronic form, the securities regulator has said.

The Securities and Exchange Commission has told the stock exchange to ensure the lodging of certificates of all listed securities in the central depository system and convert them into 'de-mat' or scripless form from January 01, 2011.

Securities of existing listing entities which got listed before January 01, 2011 will get a transitional period of a year from January 01 to be in dematerialised form.

At the moment share certificates have to be lodged in the CDS to sell, but holders can also keep paper certificates with them if they do not sell.

Listing rules are to be amended to provide for them to be re-converted to physical certificates if needed for purposes like mortgaging, the SEC said.

source - www.lbo.lk

Lanka IOC opens its first brand new outlet at Marawila with Rs. 15 m investment

An all-new innovative fuel-retail outlet equipped with the latest technology, environment-friendly lighting and washrooms with special facilities for physically challenged persons was opened at Marawila, on the Puttalam Highway by Lanka IOC PLC recently. 

Built at a cost of Rs. 15 million in just 45 days, this is the first Lanka IOC fuel outlet in the country to be completely constructed by the company. Its opening brings the number of LIOC outlets in Sri Lanka to 153.

“Our first 152 outlets in Sri Lanka were renovations of existing petrol sheds,” Lanka IOC Managing Director K. R. Suresh Kumar said. “The new Marawila outlet will therefore serve as a prototype and a benchmark for a wholly LIOC designed and built modern fuel retail station.”

The new outlet was ceremonially inaugurated by the newly appointed of Lanka IOC Chairman G. C. Daga during his recent visit to Sri Lanka.

Daga also launched XtraPremium 95, a new branded fuel which the company positions as the best quality fuel in the country. It will initially be available at the refurbished Lanka IOC fuel stations at Ratmalana and Ja-ela.
XtraPremium 95 is fortified with friction modifier additive and has an octane rating of 95. It will progressively be made available in company outlets in Colombo, LIOC said.

Twice ranked Sri Lanka’s top corporate entity in the LMD 50 rankings, Lanka IOC PLC is an overseas venture of Indian Oil Corporation Ltd., a Fortune 500 company with a ranking of 125 on the magazine’s 2010 Global 500 listing.  Beside importing and distribution of fuels Bitumen and Lubricants, the company offers value added services such as Nitrogen for tyres, Convenio stores, bank ATMs, financial services, telecommunication centres, restaurants, money transfer facilities, ServoXpress vehicle service centres and emission check centres via its fuel station network.

source - www.ft.lk

Tea production increases by 16.51%

* High growns cultivated extent falls, Budget 2010 complicated

By Steve A. Morrell

Tea production rose 16.51 percent to 274.5 million kilos as at end October 2010 from 235.5 million kilos a year ago, data from the Sri Lanka tea Board showed.

Expectations are high that 2010 would be a good year for the tea industry. Minister Plantations Industries, Mahinda Samarasinghe, at a recent forum said tea export earning are expected to reach US$ 1.5 this year.

Asia Siyaka Weekly Tea market report said subject to conditions being equal, 2010 would be an exceptional year for the entire industry.

Detailed crop results morphed to contextual readings shows some trepidation irrespective of to-date results being positive. Monthly readings over the past two months were that both September and October results were good months last year. Attributable reasons for month end declines were that weather extremes harmed crop.

But Asia Siyaka in their report confidently recorded crop expectations to be around 325 million end 2010. Tea circles said they would look forward to these results which at this point in time seemed ‘more positive’.

In 1959 the area under cultivation was 74,581 hectares for High elevation teas. Mid elevation was 66, 711, and low elevation was 46,101 hectares.

By 2000, High elevation area under tea drastically declined to 52, 272 hectares. Mid elevations too recorded declines in area, to 56, 863 hectares, however, Low elevation under tea increased phenomenally to 78,836 hectares. In 1959, the total area under tea was 187,393 hectares. In 2000 that area was estimated to be 188,971 hectares.

High grown areas have declined in extent. The situation now, approximately 10 years later could be worse.

Perhaps the Tea Board could upgrade their web site to indicate current details, as records on cultivated extents have not been undated since 2000. Lanka Commodity Brokers in their Weekly Tea market report aid increased production from Low growns was approximately one million kilos. Mid growns have shown a surplus of 0.5 million kilos as well. High growns, the report said have shown decreases, month on month of about 788,000 kilos.

The Budget was very briefly a high priority subject in Tea circles last week but died down fast because incentives did not seem practically attractive for expansion. Tea circles who did not want to be named said whatever was seemingly identified as being welcome, would have to be studied carefully and understood for meaningful applications. Presently however the budget remains a complicated series of words that would need to be sifted through to arrive at conclusions, these sources said.

source - www.island.lk

LOLC - the ‘Diversified Group of Companies of the Year’

* Blue chip bags 4 awards at the National Business Excellence Awards 2010

Diversified financial conglomerate, Lanka ORIX Leasing Company PLC (LOLC), was lauded at the National Business Excellence Awards 2010 held recently. At the event, LOLC won Gold for the ‘Diversified Group of Companies Sector’ whilst emerging runners up and 2nd runners up at the Best ‘Capacity Builder’ and ‘Extra Large Sector’ categories respectively. LOLC’s associate company LOLC Leisure Ltd. was awarded Silver at the ‘Hospitality’ category for one of its hotels – Eden Resorts and Spa.

The National Business Excellence Awards is an annual award competition conducted by The National Chamber of Commerce of Sri Lanka (NCCSL) which recognizes and celebrates the spirit of excellence amongst the local business enterprises. Enterprises which have contributed to the socio-economic development of the country through its exemplary business practices are given the opportunity to display its business excellence at a national platform, whilst being further encouraged to climb the highest ladders of achievement. Institutions that have demonstrated excellence in progress in areas such as Business and Financial Performance, Global Reach, Knowledge Integration, Technological Investment, Capacity Building, Performance Management, Corporate Governance and Corporate Social Responsibility are evaluated and adjudged by an esteemed specialized panel of judges. At the previous year’s ceremony too, LOLC emerged winner at the "Specialized Banking Sector" category in its very first participation of this prestigious competition.

Starting with humble beginnings, over the years LOLC has rapidly evolved into a highly respected, extremely dynamic and diversified group of Companies in Sri Lanka. Progressing from being a pioneer Leasing and Factoring company, LOLC emerged a leader in providing innovative financial and non-financial solutions to people and sectors in different spheres of society. At present, LOLC’s interests ranges from Finance, Agriculture, Trading, Construction, Fisheries, Transport, Manufacturing, Leisure, Tourism, Education, Information Technology, Insurance, Power & Energy, Project Development, Real Estate, Plantations to Motor Repairs and Services.

Commenting on this achievement, the Group Managing Director and CEO Kapila Jayawardena said, "Being recognized at the National Business Excellence Awards amongst many other respected peer-business enterprises is an honour in itself. It reaffirms LOLC’s success story, whilst honouring the journey commenced 30 years ago. It is with the staunch commitment and passion with which the LOLC family has always contributed towards the Company becoming a leader amongst the top Corporates of the industry. I am indeed proud of their efforts. I also take this opportunity to commend the efforts taken by NCCSL to keep the spirit of national enterprise alive in Sri Lanka."

source - www.island.lk

Renuka Agri one year on since its IPO

* Wins prestigious Silver Effie for its Renuka Coconut milk powder

One year on since its very successful initial public offering, Renuka Agri Foods PLC embarks on a major expansion drive. The company in a corporate disclosure stated it tied up with GraceKennedy Ltd, one of the Caribbean’s largest and most dynamic corporate entities, to embark on the commercial operations of its beverage expansion project next year. Under this project it will manufacture and pack Coconut Water in aseptic retail packaging and also produce a range of beverages for the international markets.

GraceKennedy Ltd is a long-standing customer and a current share holder of Renuka Agri Foods PLC. It is a public company listed on the stock exchanges of Jamaica, and Trinidad and Tobago. The GraceKennedy Group comprises a varied network of some 60 subsidiaries and associated companies located across the Caribbean and in North and Central America and the United Kingdom. 

"Renuka’s Coconut Water will be the flagship item of a range of exciting products in the company’s tetra pack expansion. Alongside Coconut Water will also be a variety of other organic and functional drinks using Sri Lankan agricultural raw materials. Renuka Agri Foods will achieve this through the utilisation of the balance funds from the Initial Public Offering of 2009. This is set to be an exciting venture for Renuka, providing and promoting both the unique flavour, and the considerable health benefits of Sri Lanka’s coconut to a thirsty international market," said a company spokesperson from Renuka Agri Foods PLC.

Renuka Coconut Milk Powder is available in 34 international markets, including Sri Lanka. It was placed among the top 100 most valuable brands in the country in the Brand Finance Annual Publication released in 2010.  Its "Van Wars / Van Yuddaya" campaign by Grant McCann Erickson recently won a Silver Effie at the Sri Lanka Effie Awards for the unique concept of creating awareness for Renuka Coconut Milk Powder among the 180 vans that transport working women on a daily basis. 

Renuka Agri Foods was listed on the Colombo Stock Exchange in January 2010 after its Initial Public Offering of November 2009 opened and closed on the same day. The company is part of the Renuka Holdings PLC Group and already holds the title of Sri Lanka’s premium manufacturer and exporter of coconut-based food products.

source - www.island.lk

Foreigners see opportunity as Lankans turn bearish

As expected non-nationals are seeing opportunity in the Colombo stock market besieged by weak heart and credit-hungry locals as the Bourse saw net foreign inflow though indices dipped sharply.
Selective but rapid buying amounting to Rs. 770.6 million by foreigners primarily on JKH and HNB triggered a net inflow of Rs. 6756 million.

“Foreigners collect amid tumbling indices,” headlined NDB Stockbrokers. “Bears continued to dominate the market as indices dropped to the lowest since mid-September. Foreign holding of the counters HNB, JKH, Cargills, Renuka Agri Foods, and Tokyo Cement nonvoting increased. Declining prices seem to have started to attract long term investors,” the stock broker added.

“The indices declined sharply on weak buying despite heavy foreign participation on JKH, accounting for a net foreign inflow for the day,” John Keells Stock Brokers said.
End result was down by 124 points or near 2% whilst MPI dipped by a similar percentage or 134 points. Turnover was a respectable Rs. 2 billion. NDB said Bank Finance & Insurance and Diversified sectors were the highest contributors to the market turnover while both sector indices decreased by 2.62% and 2.15% respectively.
Hatton National Bank made the highest contribution to the market turnover with two crossings of 842,700 shares at Rs. 400 although the share price decreased by Rs. 2.00 (0.50%) and closed at Rs 398. Foreign holding of the company increased by 845,400 shares.
Premier conglomerate John Keells Holdings also contributed significantly to the market turnover with two crossings (527,433 shares at Rs. 301 and 500,000 shares at Rs. 300) although the price decreased by Rs. 3.20 (1.08%) and closed at Rs. 292. Foreign holding of the company increased by 514,956 shares.
Another two crossings were recorded for 1,000,000 shares of Cargills (Ceylon) at Rs. 195 and 12,255,555 shares of Renuka Agri Foods at Rs. 6.30. Foreign holding of the companies increased by 313,700 and 12,255,055 shares respectively.

SEC extends deadline on clearing debt; help for small time investors

In response to stock broker recommendations, the Securities and Exchange Commission (SEC) yesterday partly relaxed its earlier tough stand on provision of credit to investor clients.
The SEC said it granted permission to stock brokers to reduce their current debtor’s positions by at least 50% by 31 March, 2011 and by 100% latest by 30 June, 2011. Previously the deadline for 100% was 1 January, 2011.

source - ft.lk

MTD Walkers goes for Rs. 3.5 b Rights Issue

MTD Walkers Plc, Sri Lanka’s only listed, fully fledged engineering and infrastructure development company, is carrying out a comprehensive restructuring to consolidate its group investments.

As a part of this restructuring, MTD Walkers announced a Rights Issue of up to 108.6 million shares (in the proportion of 19 new Ordinary Shares for each existing share) at LKR 33.00 per share. Subject to shareholder approval at the Extraordinary General Meeting of the company to be held on 10 December 2010, the new shares will be offered to MTD Walker’s shareholders for subscription.

The company will announce details of the offering, including the dates of subscription period in the near future.

The proceeds of this Rights Issue will be used for the 100% purchase of Northern Power Company Private Limited, a 30MW HFO power plant located in Chunnakam, Jaffna, as the largest provider of electricity to the Jaffna Peninsula. The balance of the Rights Issue proceeds will be used for capital expenditure and working capital requirements of the MTD Group of Companies.

MTD Walkers Plc Chief Financial Officer Viraj de Silva said: “The proposed Rights Issue represents an important part of our comprehensive restructuring plan towards consolidating the MTD Walkers Group. Further the acquisition of Northern Power will expand the current operations of MTD Walkers adding significantly to the MTD Walker Plc financial outlook and granting the possibility of above average returns to shareholders.”

Walkers Group of Companies holds a history of 156 years of operations in Sri Lanka and is considered to be the oldest engineering company in the island. In April 2007, MTD Capital BHD a leading Malaysian infrastructure development company purchased a strategic stake in MTD Walkers Plc. This investment has bought about valuable technical and other infrastructure development expertise to the MTD Walkers Group.
The group, through its subsidiaries, Walkers Sons and Engineering Ltd., CML-MTD Construction Ltd, Walkers Piling Ltd has operations in construction, pilling and engineering. Post restructuring, the MTD Walkers Group will also have exposure to power generation through its purchase of Northern Power.

Ranked as one of Sri Lanka’s Top 3 engineering and manufacturing companies, MTD Walkers Plc under its subsidiary CML-MTD Construction (Pvt.) Ltd. has undertaken many road and bridge construction projects across the nation. As the government makes strides into developing the road network across the nation, MTD Walkers Plc plays a major role in this industry with contracts for the Southern Highway and other major highways and roads throughout the island.

As a pioneer in piling in Sri Lanka, Walkers Piling Limited another fully owned subsidiary of MTD Walkers Plc, commenced operations in January 1981 and undertakes large piling contracts for both the public and private sector in Sri Lanka. Some of the recent projects undertaken and completed by this division are the Sri Lanka Customs building, the Maligawatte fly-over, the Kerawalapitiya Power Station, the Arugambay Bridge, and the Headquarters of the Ceylon Petroleum Corporation.

Additionally the Mechanical Engineering Division has completed projects involving large steel fabrication work such as the renovation of 8 stop-logs in Randenigala with the Mahaweli Authority, the Arugambay steel bridge, construction and rehabilitation of Petroleum storage tanks.

Considering the above restructuring and the expansion plans the MTD Walkers Group is well poised for strong growth in the future. 

source - www.ft.lk

Coco Lanka Group executes multiple deals

Sells stakes in subsidiaries for Rs. 224 million; Jamaican shareholder and long standing customer Grace Kennedy ups stake in Renuka Agri Foods to start coconut water and other beverage for export

Coco Lanka Group yesterday announced the execution of several deals including part sale of stake in several subsidiaries to an existing foreign shareholder with whom it has expanded into manufacture coconut water and other beverages for export.

Board of Renuka Agri Foods Plc, whose parent is Coco Lanka, said a decision was made to embark on an expansion to manufacture and pack in aseptic retail packing coconut water and other beverages. As per the existing agreement entered into with the Board of Investment, Renuka Agri  Foods’ (RAF) tax holiday is effective for the manufacture of coconut water, fruit juices, ice tea and isotonic beverages.

The Company has entered into a deal with Grace Kennedy Ltd., to manufacture and package coconut water in 330ml tetra prism packs.

As a condition of the agreement, Grace Kennedy increased its equity holding in RAF by purchasing 3% stake (12.25 million shares at Rs. 6.30 each) for Rs. 77 million yesterday from Coco Lanka Plc.
Grace Kennedy through its subsidiary Grace Foods UK held 22.5 million shares previously and with yesterday’s acquisition now holds 34.7 million shares or 8.6% stake.

Apart from a shareholder Grace Kennedy is also a long standing customer. It is a public listed company on the stock exchanges of Jamaica and Trinidad and Tobago.

The Group comprises a varied network of 60 subsidiaries and associates located across the Caribbean and in North and Central America and UK.

Coco Lanka also disposed of 500,000 shares or 50% stake in Renuka Organics for Rs. 50 million and 2.5 million shares in Renuka Teas (Ceylon) Ltd. for Rs. 96.87 million to its subsidiary RAF. The balance 50% stake in Renuka Organics is held by the business partner in the Netherlands.

Renuka Organics and its subsidiary Kandy Plantations hold the organic certification and provide the organic coconut raw material to RAF apart from its own exports of organic certified products. Renuka Teas is engaged in the export of value added Ceylon Tea and will provide raw material for the beverage expansion project.

RAF Board also approved the setting up a subsidiary in the UK with an investment of Sterling Pounds 250,000 (around Rs. 43 million) to oversee the European marketing operations of RAF, Renuka Organics and Renuka Tea Ltd.

From the sale of stakes Coco Lanka raised Rs. 224 million. RAF’s highest share price was Rs. 8.50 whilst the lowest was Rs. 3.10. Its Net Asset Value was around Rs. 2 per share.  Its share price closed at Rs. 6.10 down by 20 cents. Coco Lanka closed down 10 cents to Rs. 49.

RAF’s turnover grew to Rs. 530.4 million for the six months ended 30 September 2010 compared to Rs. 522.1 million for the corresponding period. Net profit after taxation was down by 17% to Rs. 91.3 million due to erosion of our gross profit margin arising from higher raw material prices due to scarcity of coconuts in the local market.

RAF said as per the agreement with Grace Kennedy the company will be in production by May 2011 or latest within one year of entering into the agreement. The buyer has also agreed to purchase an equivalent of one third of the plants current capacity for Coconut Milk Powder provided terms and specifications are met.
“This Coconut Water expansion is part of the company’s tetra pack expansion project which will see it manufacturing Coconut Water based beverages, Coconut Milk and Ice Tea in tetra packs for the international markets.

The balance funds from the Initial Public Offering of 2009 will be utilised for this purpose,” RAF Executive Director Shamindra Rajiyah said in a note accompanying interim accounts recently.

Coco in the first half recorded a consolidated Turnover of Rs. 769 million, a 23% increase from the corresponding period of the previous year. Profit after taxation was Rs. 245.6 million versus Rs. 115.8 million for the corresponding period of the previous year; of which profit attributable to shareholders was Rs. 189.2 million, up 123%. The company is today an Investment Trust managing a portfolio consisting of investments in equity, debt instruments and biological assets (forestry).

Grace Kennedy Ltd. is one of Jamaica’s largest and most diversified companies, with holdings spanning the food processing and canning, supermarket and other retail sectors, and banking and insurance industries.
Kingston-based GraceKennedy is structured into two primary divisions: GK Foods and GK Investments.
GK Foods represents the company’s food processing and canning operations, with a range of more than 75 products, including basic foods, as well as prepared foods such as ketchup and other sauces, cereals and the like, under the Grace brand. GK Foods also oversees the company’s chain of Hi-Lo supermarkets, as well as the company’s international trade subsidiaries throughout the Caribbean and in the United States, Canada, and the United Kingdom. In 2006, the company acquired its first international production unit, WT Foods, an ethnic foods producer based in the United Kingdom, as part of its goal of establishing itself as a globally operating company by 2020.

Helping to finance that strategy is GraceKennedy’s GK Investments wing.

This division represents the company’s operations in banking, finance, and insurance, through subsidiaries including Allied Insurance Brokers Ltd., a general insurance provider; First Global banking, financial services, and insurance group; GraceKennedy Remittance Services, which serves as a Western Union agent in Jamaica and elsewhere in the Caribbean; and the company’s 30 percent stake in the Trident Insurance group, acquired in 2007. GK Investments also includes Hardware & Lumber Ltd., one of Jamaica’s largest retail hardware chains; a Nissan car dealership; and a subsidiary providing catering to airplanes. GraceKennedy is listed on the Jamaica, Barbados, and Trinidad & Tobago stock exchanges and is led by Chairman and CEO Douglas Orane.

source - www.ft.lk

Monday, November 29, 2010

All share Price Index, History Performance & Way forward Update - 02

22/11/2010 (S.L.S.Picks) We have obtained the Movement of All Share Price Index for the Past 22 months commencing from 01/01/2009 in order to have a closer look of its behavior & to get a clear idea of its future direction. Here we have used 30 day,90 day, & 180 moving averages against the movement of ASI for the past 22 months period.
  • In January 2009 All Share Price Index was at 1533.79
  • End of the trading session as at 18/11/2010 (Thursday) All Share Price Index was at 6565.00. A growth of 5031.21 points (328.02%) for the period. These performance helps Colombo Stock Exchange to be in No 01 position in terms of growth in Asia so for year 2010, & to retain a top position in the World  for this year.
  •  During this period ASI touched the 30 day moving average in eight times ( A,B,C,D,E,F,G & H points) & fell down below 90 day moving average only in a single time (C) which is during the period of month of November 2009. 
 A - Reported during the period between 07/07/2009 to 17/07/2009. ASI was at 2376.22 & 2370.55 levels. The bearish trend lasts only for 10 days.(approx) 

                                   GROWTH - 140.26 points

B - During the period between 11/08/2009 to 24/08/2009. ASI was at 2510.81 & 2522.92 The bearish trend lasts only for 14 days.(approx)

                                    GROWTH - 559.99 points

C - Reported during the period between 19/10/2009 to 30/11/2009. ASI fluctuated between 3082.91 -  2913.39 levels. The bearish trend lasts for 41 days (approx) & this was the longest period that the market was at a downward trend for the year 2009 after the Bull run commenced in May 2009.

                                          GROWTH - 911.91 points

D - Reported during the period between 01/03/2010 to 05/04/2010. ASI was at 3825.30 & 3781.90 levels.In this scenario bearish trend continued for 34 days (approx).

                                                   GROWTH - 453.79 points

E - Reported between 21/05/2010 & 31/05/2010.At that time ASI was fluctuating between 4235.69 points & 4237.16 points. The bearish trend continued for 13 days (approx).
                                                         GROWTH - 311.49 points

F - Reported on 06/07/2010 & the ASI was at 4547.18 points.The bearish trend last only for 7 days.
                                GROWTH -   315.68 points

G - Reported on 09/08/2010 & ASI was at 4862.86. Bearish trend last only two days.This was reported after touching ASI 5000 mark for the first time in the history of Colombo Stock Exchange & the index touched high as 5156.83 before settling down.

                                GROWTH - 1971.75 points

H - Reported on 11/10/2010 & the ASI was at 6834.6. During this two months period ASI growth was staggering 1971.75 points, the highest growth reported for the last 22 month period.

The bearish trend still continues at the Colombo Stock Exchange & now its more than 01 month in the negative territory. As at 18/11/2010 it was 01 month & 7 days. The ASI touched almost 90 day moving average on 16/11/2010 by reporting ASI 6472.42. However later we witnessed a slight recovery in the index due to the strong buying support for the Blue chip counters & fundamentally sound counters since many counters were trading at bargain price levels & on back of healthy 3rd Q/ 2nd Q corporate results.

The main reason for the negative trend in the market is the settlement of Debts by the investors before the start of the new year 2011 in order to comply with the new regulations. Further we can expect a market correction especially after a massive growth of ASI 1971.75 points withing a very short period of 02 months. However we noticed that the market was trading almost 600 points down from the high as ASI 7100 levels.

                                         GROWTH -  ? points

  • Can we expect the same growth momentum of ASI reported during the past one year & 11 months to continue in future as well? 
  •  The ASI movement as at end of 18/11/2010 was still below the 30 day moving average. In all the previous occasions once the ASI breaks the 30 day moving average it gave a start for a new bull run.
  •  The country is heading for a strong economic recovery led by the H.E. President Rajapaksha one of most powerful leaders in the world now, who was successful in eradicating the 30 year old civil war in our country. Companies in the Banking & Finance, Tourism, Construction, Plantation + Agriculture sectors etc are the possible sectors to lead the economy in post war Sri Lanka. However the bearish trend still continues in the Colombo Stock Exchange due to the over trading by the investors & the poor financial control measures adopted by the Stock Brokering Companies in Sri Lanka.
  •  The corporate results for the September quarter reflected strong growth performances by the listed companies.
  •  We strongly believe that the best period of the Colombo Stock Exchange is yet to be seen.

  • 2010 budget was an encouraging one for the listed companies as the corporate taxes have reduce to 28% from 35%. Removal of debit tax is a positive move for the banks as well as the reduction of Vat from 20% to 12% would definitely improve the bottom line of the banks.  

data - cdax.lk

Related stories - All Share Price Index - History peformances & Way forward Update 01

Sri Lanka shares down 2 pct on forced selling

COLOMBO, Nov 29 (Reuters) - Sri Lanka's share market plummeted 2 percent to a more than two-month low on Monday as stockbrokers began issuing margin calls in response to a directive by the regulator, analysts said.

The main share index fell 124.06 points or 1.94 percent to 6,257.01 its lowest since Sept. 15. Asia's best
performer in 2010, with a 84.8 percent gain, has fallen 13.2 percent since hitting a record high on Oct. 4, mainly due to a lack of credit in the market.

After the market closed, the Securities and Exchange Commission said it had extended the deadline for total credit recovery by six months until June 31.

The bourse is trading at a forward price-to-earnings ratio of 20.1 compared with all-Asia's 13.2 and global emerging market's 12.3, Thomson Reuters StarMine data showed. The CSE's 14-day relative strength index is at 31.9, close to the lower neutral limit of 30.

The bourse saw trading volume of 79.7 million shares on Monday, higher than average trading volume of 56.5 million and 44.3 million in the past five days and 30 days respectively. The 90-day average volume of bourse is at 70.7 million.

Foreign investors have sold a net 26.6 billion rupees in shares this year, but on Monday bought a net 675.5 million rupees. Turnover was 2 billion rupees ($17.9 million), more than three times the 2009 daily average of 593.6 million rupees.

The rupee edged up to 111.45/48 a dollar from Friday's 111.50/52 on dollar sales by banks on hopes of the rupee further appreciating after the central bank relaxed strict foreign exchange controls, currency dealers said.


  • New IPOs from firms in which government has a stake, as revealed by the central bank governor.
  • If budget proposals encourage more IPOs, share trading
  • Whether forex control relaxation will attract more foreign buying in shares or corporate debentures
  • Extent of the rupee's rise and how the central bank might ease appreciation pressure 
source - www.xe.com

Sri Lanka stocks close down 1.9-pct

Nov 29, 2010 (LBO) - Sri Lanka stocks closed down 1.9 percent Monday with index heavy stocks, including banks coming under selling pressure, brokers said.

The All Share Price Index closed at 6,257.01, down 1.94 percent (124.060 points) while the Milanka index of liquid stocks dipped 1.93 percent (134.48 points) to close at 6,818.17, according to Colombo Stock Exchange (CSE) provisional figures.

Turnover was 1.9 billion rupees. Sri Lankan stocks rose over 120 percent up to September this year, partly due to speculative buying on margin trading.

The market has been correcting since since October, but the stocks are still among the highest valued stocks in the region.

On Monday the Securities and Exchange Commission gave until June 2011 to clear credit given by brokers to clients, extending an earlier December deadline.

By March 50 percent of credit has to be cut down.

The move may reduce panic selling by over-extended margin players, analysts said.

Among banks Sampath closed at 248.90, down 11.70 rupees, Commercial Bank closed at 263.20, down 8.10 and DFCC closed at 196.80, down 4.70 rupees.

HNB closed at 196.30 rupees down 8.40 rupees.

Banks were among the biggest gainers this year, on expectations that taxes would come down after the budget. Though taxes did come down, the savings are expected to be put in a special fund subject to government directed lending.

Directed lending can lead to credit losses and mis-allocation of capital.

Though the budget cut corporate taxes to 28 percent from 35 percent, the government pushed up business costs by charging an extra 2.0 percent for a new pension fund.

Hydro Power Free Lanka closed at 14.80, up 0.10 cent with 1.2 million shares being traded.

John Keells Holdings closed at 292.60, down 3.20 cents with 1.1 million share traded while Hayleys closed at 330.10, down 9.90 rupees.

source - www.lbo.lk

Breaking News - Sri Lanka SEC extends margin deadline

Nov 29, 2010 (LBO) - Sri Lanka's Securities and Exchange Commission has extended a deadline to cut credit given by brokers to their clients by six months to June 2011, with half the credit to be cut down by March 2011.

The SEC said it had decided to extend the December deadline following representations from market participants.

Sri Lanka's stocks had gained 120 percent by September partly helped by margin buying and also purchases by a state run pension fund.

The SEC asked brokers who had given credit to clients to cut their positions by December 2010 and transfer remaining positions to licensed margin providers.

Unless corrected speculative stock bubbles can crash steeply having economy-wide implications.

Sri Lanka's stocks traded at over 28 times historic profits at one time, one of the highest in the region.

Analysts say stocks will stabilize one corporate profits catch up.

Lanka Securities, a brokerage said with 92 percent of profits of listed firms out in the September quarter total profits were up 169 percent to 34.5 billion rupees, up from 12.8 billion rupees a year earlier.

A recent budget has also cut corporate profits, but there were other disturbing moves including a Zimbabwe style warning to plantation firms that any uncultivated land will be distributed among the landless.

source - www.lbo.lk

Sri Lanka corporate profits surge: report

Nov 29, 2010 (LBO) - Sri Lanka's corporate earnings for the quarter ended September 2010 continued to surge upwards reflecting the positive economic growth with motor firms doing particularly well after an import tax cut, a research report said.

Earnings of 220 firms - about 92 percent of listed firms - have grown by 169.4 percent in the September 2010 quarter to 34.5 billion rupees from 12.8 billion rupees in the same quarter last year, Lanka Securities said in its quarterly earnings review.

The profit for the cumulative period of the current financial year has increased by 143.5 percent from the year before.

Out of the 20 sectors in the Colombo bourse, only three sectors, namely footwear and textiles, oil palms and services, saw a drop in profits in the September quarter.

"The motor sector which vastly benefited from the tax reductions on imported vehicles posted a significant growth of 897 percent year-on-year in earnings in the September quarter," the report said.

The government slashed import taxes on cars in June.

The total sector earnings reached 713.8 million rupees in contrast to the mere 71.6 million rupees profit recorded in the comparative quarter.

All the companies in the motor sector except Autodrome more than doubled their earnings in the quarter with Dimo being the top earner in the sector contributing 42.8 percent to the total sector earnings, Lanka Securities said.

The brokers said that with strong earnings growth share prices are likely to become less expensive.

The recent bull run on the Colombo bourse has made it one of the most expensive share markets in the region.

"According to our calculations the market PER (price-to-earnings ratio) adjusted to the latest financials is 18.83 times and the market PER is expected to decline further in the coming period due to the growth in the earnings," the brokers said.

"The favorable tax changes in the budget may supplement the top line growth in the corporates driving the PERs down."

The government budget for 2011 proposed reductions in income and corporate taxes which are seen as benefiting businesses.

source - www.lbo.lk

Fitch affirms Nations Trust Bank at 'A(lka)'; Outlook Stable

Fitch Ratings on Friday affirmed Sri Lanka's Nations Trust Bank PLC's (NTB) National Long-term rating at 'A(lka)'. The Outlook is Stable. The agency has simultaneously affirmed NTB's outstanding LKR500m senior unsecured redeemable debentures at 'A(lka)' and outstanding LKR1bn subordinated debentures at 'A-(lka)'.

NTB's ratings take into account its evolving franchise within most business segments, healthy profitability, and improved capital position. Fitch also notes that the bank's loan book contains a relatively higher proportion of consumer products and leases.

The continued consolidation of NTB's lending and deposit franchise, and risk management processes and controls, together with a sustained healthy capital structure, could result in an upgrade of its ratings. Conversely, an unexpected weakening of NTB's asset quality or earnings could result in a rating downgrade; however this is less likely over the medium-term.

NTB recorded loan growth of 23% in the nine months to end-September 2010 (9M10), which was higher than its peers'. Much of this growth (83%) stemmed from medium and large-corporate exposures, which increased to 35% of loans at end-9M10 from 24% at end-December 2009 (FYE09), and reduced the bank's reliance on consumer products and leasing to some extent (end-9M10: 33% and 19% of loans, respectively). Fitch notes that NTB's cost of funds is somewhat higher than larger peers', which is partly a function of its late entry into the banking sector and thus its evolving deposit franchise, and also driven by the higher proportion of money market repurchase agreements which the bank uses to fund its government securities trading book. Therefore the agency notes that NTB is likely to continue its somewhat high reliance on high-yield consumer products and leasing over the medium-term, if it is to sustain a healthy level of profitability and, in turn, a healthy capital structure.

Similar to most peers, a widening net interest margin (NIM) and capital gains on the held-for-trading government securities portfolio helped boost NTB's profitability in 9M10. Its return on asset (ROA) improved to an annualised 1.46% at end-9M10, compared to an average of 0.98% between FYE07 and FYE09. However, Fitch expects NTB's ROA to come under pressure over the medium-term, which is in line with its expectations for the sector, as the present high liquidity within the local banking system is disbursed to meet with improving credit demand. Furthermore, capital gains on bond trading is likely to be limited over the medium-term, as market interest rates have gradually started to trend upwards since October 2010.

Fitch notes that the bank's NPL ratio has generally remained lower than most of its peers' during benign economic environments such as the one seen at present, but has peaked higher during times of economic stress. NTB's gross NPL ratio reduced to 4.47% at end-9M10, from a peak of 8.47% at FYE09, driven by the bank's concerted recovery efforts and good credit controls amid improving economic conditions, and regular write-offs of fully-provided credit card and personal loan NPLs. Low NPLs, combined with an equity infusion in Q110 (see below), has improved the bank's net NPL/equity ratio to a relatively strong 16.74% at end-9M10 (FYE09: 39.82%).

The bank received an equity infusion of LKR1.26bn in Q110, due to the exercising of the first (of two) round of warrants attached to its 2008 rights issue, to which key shareholders John Keells Group ('AAA(lka)'/Stable, 29% stake of NTB) and Central Finance Company PLC (CF, A+(lka)'/Stable, 19% stake of NTB) subscribed in full. A further capital infusion of up to LKR735m could materialise in Q111, if the second round of warrants is exercised.

At FYE09, NTB accounted for a share of 3% of total licensed commercial bank assets in Sri Lanka, and currently operates through a network of 40 outlets and employs over 1,500 staff.

source - www.dailymirror.lk

Wobbling value

The once high flying Colombo stock market has been struggling of late with over Rs. 244 billion in value wiped off since 1 October  a development which has drawn mixed reactions.On 1 October when the market peaked to its highest graduating from Asia’s best to world’s best performing the market capitalisation was Rs. 2.35 trillion, up 116% year to date then.

The benchmark All Share Price Index (ASPI) was up 111%.

However by Friday last week the market capitalisation was struggling at Rs. 2.11 trillion, down by Rs. 244 billion whilst the ASPI has dipped by over 10%. The market remains fragile despite a pro-business Budget presented by President Mahinda Rajapaksa last week. Despite the dip, the year to return offered by Colombo bourse is a high 88.5%.Independent analysts welcome the dip which they described as a “correction” from the market’s artificially high level in October. They opined that further correction was warranted with some tipping the ASPI to settle down to between 5,000 or 5,500 point level. Though this means a further loss of billions of rupees, they pointed out that in comparison to end 2009 level, the forecast 5,500-point level would still mean up over 60%.

It was noted that market settling down to 5,500 point-level would lend more sensibility and maturity paving for a fresh round of Bull run thereafter.

“The more serious and long-term investors continue to see opportunity in fundamentally strong stocks as well as post IPO stocks. In fact we are likely to see the latter becoming a class of their own offering real value,” these observers noted.

However brokers and some investors pin the market’s struggle to over regulation. They said though measures by the Securities and Exchange Commission (SEC) were aimed at bringing order of late there has been chaos and heartburn among even the more seasoned investors.

They alleged that the continuity of the price band mechanism along with extremely market-unfriendly 15 day period as well as new credit rules continue to dampen investor sentiment. “What keeps a market alive is both fundamentals and speculation.  A market cannot become dynamic sans the speculative element. The SEC has been too obsessed thereby over-regulating the market,” a broker alleged.

“In the recent past there was unnecessary fears created by reference to market as casino and one that is ridden with manipulation.  These led to several regulations killing the spirit of the market as well as driving away new and prospective investors,” an investor opined adding “Active play by retailers and day traders is essential and some of the new rules have succeeded in keeping them out of the market.”
Meanwhile brokers were confident of a return in improved investor sentiment.

“Activity in the latest counter listed reflects that investors are keen to participate in the market. Relaxation in forex regulations will also expand the market base in future. With refunds from the IPOs flowing in we expect improved buying interest in fundamentally strong counters,” Acuity Stockbrokers said.

 “Despite strong interest in the diversified and banking sector counters subsequent to the unveil of the budget for fiscal year 2011, the bourse continued to trend downwards during the week,” Asia Securities noted.  It said that healthy improvements with the market P/E moving from 25.0X to 20.0X, Colombo is elevating itself to be an attractive frontier market.

“With the market earnings edging nearly 36.6% QoQ, we see immense value and growth in most of the sectors. Hence, we advice our learned investors to capitalize on attractively low priced counters which are fundamentally strong with sustainable growth potential despite the upcoming credit settlement regulation,” Asia Securities said.

source - www.ft.lk

Corporate earnings up 170% to Rs. 35 b in Sept. Qtr.

CORPORATE earnings reported for the quarter ended September 2010 of 217 listed entities record a year on year growth of 170% as against the market earnings of September 2009 reaching Rs. 35 bn as against Rs. 13 bn in September 2009 continuing to build on the turnaround triggered in the latter half of 2009.

Acuity Stockbrokers in a special review said that 36 companies or 16.6% of the 217 surveyed have reported losses while the majority has reported sound growth levels.

“Despite the losses made in a few companies all sectors have contributed positively to market earnings with telecom, land and property, plantations, tourism, power and energy indicating a strong turnaround in earnings potential,” Acuity Research team said.

It said key sectors that have contributed to the quarter earnings were Banks, Finance and Insurance amounting to 26.7% of total while the Diversified sector brought in 17.7% and Food, Beverage and
Tobacco sector contribution amounted to 11.8% and Telecommunication 7.8%. Seven key sectors account for 81.4% of the total earnings generated during Q3 2010 i.e. Banks and Finance, Diversified, F&B, Telecom, Manufacturing, Investment Trust and Hotels and Travel.

source - www.ft.lk

Companies raise over Rs 4 b through IPOs

Charumini de Silva

Companies have raised over Rs 4 billion through initial public offerings this year for their business expansion projects.

Colombo Stock Exchange (CSE) Business Development Manager, Thushara Jayaratne told Daily News Business that there were eight Initial Public Offerings (IPOs) held during this year and has raised capital worth Rs 4.3 billion to date. The companies that were listed during this year are Renuka Agri Foods, Ceylon Tea Brokers, Raigam Wayamba Salterns, Vallibel Finance, Odel, PCH and Hydro Power Sri Lanka.

He said the Urban Development Authority (UDA) also raised over Rs five billion through a debenture issue, while Sinhaputhra Finance and Citizens Development Business Finance listed in the CSE by way of an introduction. Hydro Power Sri Lanka is listed from last week while Laugfs Gas will soon get listed, Jayaratne said.

Meanwhile, Treasury Secretary Dr P B Jayasundara said at a seminar recently that IPOs should be promoted while encouraging industrialists to list their shares and debt in the share market to make it a capital formation to sustain their ventures.

source - www.dailynews.lk

Singer Finance to announce IPO this week

* Deposits up 38% in 2009/10, lending portfolio Rs. 3 billion
* NPL 2.3%, below industry average of 11.7%

In keeping with regulatory requirements, Singer Finance (Lanka) Ltd. is planning an initial public offering details of which would be announced by next Thursday.

Having achieved a remarkable Gross Non-Performing Loan (NPL) ratio of 2.3 percent, compared to the industry average of 11.7 percent as at June 30, 2010, and increasing its lending portfolio to Rs 3 billion as at 31st March 2010 since its incorporation in 2004, the Company has set its sights on further expansion through a corporate plan that emphasizes superior service, products, and financial discipline, the company said in a statement.

Compared with an industry average NPL ratio of 11.7 percent as at June 30, 2010, Singer Finance’s ratio of 2.3 percent as at June 30, 2010 is outstanding, it said. "The Company’s Gross NPL ratio is significantly low for consumer durables financing (approximately 1.1 percent) while leasing and hire purchase financing for vehicles also has a low NPL percentage (approximately 6.75 percent). Given a financial environment where the NPL ratios in the industry had been weakening due to the adverse macroeconomic environment, the fact that Singer Finance’s ratio has been improving since the 2007 financial year is especially impressive. The Company’s low NPL ratio, which is a reflection of its high asset quality, has been achieved through prudent marketing, credit and finance management practices and the guidance of its parent company, Singer (Sri Lanka) PLC."

"For example, even though regulatory policy stipulates 50 percent provisioning for loan defaults over six months and 100 percent provisioning at twelve months, Singer Finance is far more stringent, with 50 percent provisioning for defaults over four months and 100 percent provisioning at the end of six months in the case of leasing and hire purchase facilities.

"For consumer loans, the Company makes a 50 percent provision for defaults over two months while 100 percent provisioning takes place at the end of four months. By adhering to these higher self-imposed standards, Singer Finance has been able to maintain a healthy loan loss coverage ratio and expedite the recovery process."

As a Registered Finance Company fully owned by Singer (Sri Lanka) PLC, Singer Finance provides an extensive range of financial services to a wide variety of Sri Lankans. Standard services such as vehicle hire purchase and leasing and the acceptance of fixed deposits are bolstered by a number of innovative products, including agro-equipment financing as well as credit facilities for products manufactured by Singer.

Singer Finance also offers real-time repayment channels, which allow customers to make their leasing, hire purchase and loan installment payments at any Singer Finance branch or any one of over 370 Singer Plus, Sisil World, Singer Homes, and Singer Mega showrooms island-wide.

Singer Finance has widened its reach with 6 branches, in addition to its Head Office business unit located at 331, Dr. Colvin R. De Silva Mawatha, Colombo 02 (Union Place), as well as 6 customer service centers. The Company’s branch and customer service network caters to the Western, North Central, Wayamba, Central, Southern and Uva provinces, with main branches in Kurunegala, Anuradhapura, Wennappuwa, Wattala, Kandy and Matara, and customer service centers in Thambuttegama, Medawachchiya, Nikaweratiya, Dambulla, Mahiyangana and Galle.

The Company’s interest income and net interest income have increased, with a compound annual growth rate of 75.6 percent and 62.8 percent respectively. "These aggressive gains have been driven by a rapid expansion of the Company’s share of the leasing and hire purchase market, as well as the successful launch of consumer financing for Singer (Sri Lanka) customers in 2009. Singer Finance has also recorded a significant improvement of 19 percent in its net interest margin," the company said.

"The significance of Singer Finance’s accomplishments is magnified, when the difficult environment faced by the RFC sector is taken into account. For example, the Company has been able to achieve a steady growth in its deposit base, despite the outflow of funds from the RFC sector caused by the troubles experienced by certain finance companies. Indeed, Singer Finance recorded a 38 percent year-on-year growth in its public deposits for the 2009/10 financial year," it said.

Singer Finance has a capital adequacy ratio of 16.10 percent as at August 31, 2010.

source - www.island.lk

Sunday, November 28, 2010

'Sri Lanka emerging as a tourism hotspot', Al Mansoori

Arab travellers to Sri Lanka increased by 58% in the first ten months of the year according to Sri Lanka Tourism Promotion Bureau's (SLTPB) Middle East office. Statistics compiled by Sri Lanka Tourism Development Authority indicate that the growth from the Middle East is higher than the overall growth in arrivals to Sri Lanka which is pegged at 43.5%.

"Sri Lanka is witnessing a dramatic rise in visitors which in turn has enabled vast development of Sri Lanka's existing tourism infrastructure with new hotels and better road networks currently underway island-wide to cope with the destinations increasing popularity," remarked Ms Heba Al Mansoori, Middle East Director of SLTPB.

Ms Al Mansoori noted that several hotel giants are undertaking expansion, refurbishment and major re-development plans in order to meet increased demand for hotel rooms. "All this will help accommodate the exponential increase in tourist arrivals."

Several development projects in the East are currently underway which was previously inaccessible. Three areas which are of focus are Pasikudah, Kucheveli and Kalpitiya. Many hotel projects are in progress and by the year 2011/2012 we hope to have added 1,000 rooms.

In addition other development is also in progress in the rest of the island. We just opened the new Port in the South of the country and a new Airport will be soon opened as well in the South.

SLTPB opened its office in Dubai in May 2008 to maximize the opportunities emerging throughout the Middle East while strengthening support for the travel trade in the region.

Since the opening, the Dubai office has co-ordinated all of Sri Lanka's tourism promotional activities in the Arab markets including exhibition participation, marketing visits, presentations and road shows, brochure distribution, public relations, as well as familiarization visits to the island for influential business and travel journalists. The office also functions as the preliminary contact point and enquiry processing centre for travel trade companies and tourists in the region.

Sri Lanka is now on the threshold of developing to its full potential as a prime tourism destination with diverse offerings for members of the whole family whether it is beaches, shopping, visits to wildlife reserves, heritage and culture sites, relaxing at a spa, or simply enjoying the cuisine.

source - www.ameinfo.com

Impact on listed firms

The Sri Lankan government’s budgetary fiscal plans was seen a very pro private sector budget. The middle class will now be able to save more and also consume more, two activities which drives private sector investment in the country.

The reduction in the VAT rates also means more savings and also a reduction in the cost of living. In the case of the corporate and banks, the reduction in the corporate tax base to 28% from 35% was seeing as being positive, but if sustained investment is to be carried out, then taxation rates will need to go down even further.

There was a certain element of confusion with regard to the Investment fund, to which banks will have to contribute to create a “long term investment” fund. Its purpose was not properly lined out. Planners seemed to have ignored the fact that only banks lend long term to the private sector due to the lack of a dynamic corporate debt market, and absence of venture funds or other seed capital bases.

The other source of confusion was the Central Bank administered pension fund to which the employer and the employee have to contribute 2% of the worker’s salary. Again the terms of the pension fund have not been laid out clearly and many felt that there should have also been a private sector participation in the administration of the fund. There was justified comparisons with the Central Bank managed Employees Provident Fund (EPF) and the Employees Trust Fund (ETF) which are gratuity funds, but given the low returns of the past, many treat it as a tax rather than a savings scheme. On the positive side, the government has recognized the need for the pension fund. Industry wise, the biggest blow was to the two telecom firms, Dialog Axiata and Sri Lanka Telecom who now face a Rs 2.00 per minute tax on calls made to overseas residents. With Skype and Google offering low cost charges, many feel that there will be certain migration to these networks. In a commodity type business, business always migrates to the low cost service provider.

Already having lost competitive space in the local call market due to the floor price of Rs 2.00 being implemented (which will be reduced to Rs 1.50 in June 2011), the companies have been competing on international call rates and roaming charges. The other body blow was the tax on foreign programming content taxes being imposed on cable channels. The vice trade too will suffer an increase in taxes with Alcohol, Tobacco and Casino business seeing an increase in corporate tax levels to 40% from 35%. The firms affected by this increase in tax will be Distilleries Company, Lion Breweries and Ceylon Tobacco. While it may initially impact their bottom line, these firms have found fiscal protection from future completion. High taxes tend to drive businesses away and in this case will make competitors think twice about entering the market.

Hoteliers benefited from lowering of the corporate tax base to 12% from 15%. A US$20.00 per bed tax was to be charged on 5 star hotels that charge less than US$125.00 per room.

Firms such as Singer Sri Lanka, Brown & Co and Hunter & Co will benefit from the abolition of import duty on branded items. This is with the view of making Sri Lanka a shopping hub along the lines of Dubai and Singapore. These firms will also benefit from the abolition of import duty on the agricultural equipment.
Overall, the budget is a plus for a vibrant private sector and middle class, despite a few flaws.

source - www.lakbimanews.lk

Sri Lanka regulator to permit friendly bank mergers: report

Nov 28, 2010 (LBO) - Sri Lanka's central bank will support friendly mergers of banks, which can be difficult due to existing regulations, a media report said.

"We have had some feelers and have discussed it at the Monetary Board (the governing board of the central bank)," The Sunday Island newspaper quoted Central Bank Governor Nivard Cabraal as saying.

"We have let our thinking to be known to banking circles. But we don’t want any hostility; there must be agreement all round."

The report said an earlier attempt to merge two large banks through a share swap had been abandoned after regulatory approval did not come.

Though mergers can also reduce competition, some banks have been pushing for mergers to create larger entities which would allow them to expand abroad and also cut operating costs.

Banks - especially those catering to different classes of risk - are needed to finance small and medium businesses.

source - www.lbo.lk

Sunday Business News Articles







Budget impact positive on banks, share market: Analysts

By Duruthu Edirimuni Chandrasekera 

Sri Lanka’s banking and finance sector has come out a winner from the 2011 budget as it has put this sector on an even playing field with the rest of the sectors pertaining to taxation, according to industry analysts.

“The reduction in VAT on financial services from 20% to 12%, elimination of bank debit tax, the removal of VAT on leasing assets plus in overall income taxation to 28% has put the sector on a level playing field with the rest of the sectors in terms of taxation,” Nikita Tissera, Head of Research Sampath Securities said.

He said that the banking and finance as a sector paid approximately 55% to 60% of their earnings as tax and has been trading at a discounted multiple for that reason compared to other industries and other banks in the South Asian region. He added that the 8% reduction in the VAT on financial services is more than the systematic reduction which will soon see reactionary re-pricing in the banking sector.

“The government also plans to increase the entities listed on the Colombo Stock Exchange by way of Initial Public Offerings (IPO). With this in mind, 1% of the value of IPO has been allowed as a deductible expense for tax purposes,” he noted.

Analysts noted that the Share Transaction Levy increase on stock market transitions from 0.2% to 0.3% will result in higher transaction fees on trading activities. “This pushes the overall cost of a share transaction to 1.12% including brokerage,” an analyst added.

Ravi Abeysuriya, CEO Heraymila Securities noted that freer cross border capital flows both in and out of the country, easier equity market listing, fairer tax treatment of corporate debt securities, and proposed expansion of pension funds to fund future retirement costs are positives. “This will also deepen the capital markets, which the businesses can tap,” he added.

Mr. Tissera noted that the tourism sector will benefit from the reduction of taxation to 12% from 15% from income from tourism related businesses.

source - www.dailymirror.lk

Saturday, November 27, 2010

GM IPO now world's biggest

By Clare Baldwin and Jonathan Spicer

NEW YORK | Sat Nov 27, 2010 6:12am IST

NEW YORK (Reuters) - General Motors Co's initial public offering became the world's biggest at $23.1 billion after underwriters swiftly took up additional shares following last week's IPO.

The added shares vaulted GM past Agricultural Bank of China's $22.1 billion IPO in July and underscored the strong demand for the taxpayer-rescued automaker's stock.

GM said on Friday that underwriters led by Morgan Stanley, JPMorgan Chase & Co, Bank of America Merrill Lynch and Citigroup Inc, exercised their full option on an additional 71.7 million common shares worth $2.37 billion.

They also exercised an option to purchase 13 million preferred shares for $650 million.

Underwriters had 30 days from the IPO to exercise the options.

GM last week had raised $20.1 billion in an IPO of common and preferred shares in what was the biggest U.S. IPO ever. Without the preferred shares, GM's IPO would have been smaller than China's AgBank.

On Nov. 18, their first day of trading, the shares rose 3.6 percent. They closed on Friday up 33 cents at $33.81, or 2.5 percent above the $33 IPO price.

The U.S. government bailed out GM for $50 billion after the automaker's 2009 bankruptcy.

The IPO caps the first stage of a turnaround that has taken the 102-year-old automaker from near-death to an unlikely Wall Street flotation favorite in 2010.

A successful stock debut may help the Obama administration argue that the controversial taxpayer bailout of GM was worthwhile.

The White House has said U.S. taxpayers are on track to recoup the full investment made by the administration and that it hopes to make substantial progress toward shedding the government's stake entirely by mid-to-late 2012.

The strong response to the stock sale reflects growing investor confidence that GM is moving beyond its unpopular, taxpayer-funded bankruptcy with sharply lower costs and higher profit potential.

The U.S. Treasury remain GM's largest shareholder after the IPO with a third of the shares outstanding.

Barclays Capital, Deutsche Bank, Goldman Sachs, Credit Suisse and Royal Bank of Canada are GM's other major underwriters. Lazard and Boston Consulting Group served as advisers to the Treasury. Evercore Partners advised GM.

In the days before the IPO, the price range and the number of shares, including preferred, were all increased.

GM last week sold 478 million common shares at $33 each, raising $15.77 billion, as well as $4.35 billion in preferred shares, more than the initially planned $4 billion.

(Reporting by Clare Baldwin and Jonathan Spicer; editing by Carol Bishopric and Tim Dobbyn)

source - in.reuters.com

Sri Lanka aims to double share market cap by 2012

By Shihar Aneez and Ranga Sirilal

Nov 26 (Reuters) - Sri Lanka plans to double the Colombo Stock Exchange's .CSE market capitalisation from the present $19.8 billion over the next two years by listing companies partly owned by the state, the central bank governor said on Friday.

Speaking at a Reuters forum in the capital Colombo, Governor Ajith Nivard Cabraal said that will ensure there is enough liquidity for foreign investors to take part in the Indian Ocean island nation's post-war economic revival via equities.

Many institutional investors and funds trying to catch a piece of the growth in Sri Lanka's $42 billion economy since the end of a civil war in May 2009 have shied away from the share market, because of its small size and lack of free float.

"We are targeting a few billion rupees through listing companies which have a government stake," Cabraal said. "Some big companies partially owned by the government may be listed."

He also said that one or two privately-held conglomerates and other large family businesses are headed toward listing.

"This will probably double the capitalisation," Cabraal said.

Sri Lanka's share market capitalisation is at 2.2 trillion Sri Lanka rupees ($19.8 billion), having doubled in the first 10 months of 2010, with local investors and state-owned funds surging into shares.

Foreign investors have sold a net 27.3 billion rupees in shares this year, with most offshore interest having been focused on government treasury securities which still offer an attractive yield in the wake of the global financial crisis.

But the limit on foreign holding has been reached, leaving investors searching for other ways to get exposure.

Sri Lanka is also aiming to double its per-capita gross domestic product to $4,000 by 2016, and that means the banking sector's lending capacity has to be more than doubled to achieve that, Cabraal said.

"Banks' lending should be more than double to around 4 trillion rupees from the current 1,800 billion rupees in the next five years to double GDP per capita," he said.

Though the government is not considering relaxing a 100 percent tax on foreign property ownership, it has planned to release prime property in the capital Colombo for large outside investors, and to raise money through long-term leases.

Colombo has some of Asia's most valuable and underdeveloped seafront land, owing to a quarter-century civil war that made tourism investment a risky prospect.

"We've agreed to release valuable land where army and defence establishments are located and release them on long-term lease," Defence Secretary Gotabaya Rajapaksa, who is also overseeing post-war urban development, told the forum.

Part of the process involves moving about 75,000 families from slums and shanties in Colombo which are located on valuable state property or road and railway reserves. The plan is to build homes outside the capital for relocation, he said.

"We have to find a way to finance this because it is expensive for relocation, but it is feasible. International, local companies partnering with govt to build 30,000 homes over next three years for slumdwellers' relocation," he said. (Writing by Shihar Aneez; Editing by Bryson Hull)

source - in.reuters.com

Indices dragged down further despite favourable budget proposals

During the week the All Share Price Index (ASPI) declined by 183.93points to close at 6,381.07points, while the Milanka Price Index (MPI) also declined by 162.78 points to close at 6,952.65points.  The daily average turnover was SLRs1.6bn compared to SLRs.1.8bn last week and the week ended with foreign buying amounting to SLRs.2.3bn whilst foreign selling was SLRs.1.7bn.

On Monday, both ASPI and MPI dropped by 49.20 and 37.49 points respectively. Total turnover for the day reached Rs.1.4billion with JKH contributing with a turnover of SLRs.447mn which included several crossings amounting to 1.5mn shares at SLRs.300.00. SMB Leasing, the most heavily traded counter for the day closed up16.67% at SLRs.1.40.

On Tuesday, the announcement of the 2011 budget proposals which were aimed at rapid economic growth and development of the country failed to lift the market as both ASPI and MPI declined by 61.61points and 97.55 points respectively. Commercial Bank generated the largest turnover for the day of SLRs.182mn with the share closing at SLRs.270.00.  Sampath Bank contributed with a turnover of SLRs.163mn which included a crossing of 200,000shares at SLRs.267.00 while the retail favourites, Voting and Non Voting shares of SMB leasing continued to be actively traded. Total turnover for the day amounted to SLRs.1.2bn.

Indices closed up marginally on Wednesday with ASPI gaining 7.94 points while MPI edged up by 18.80 points. Total turnover amounted to SLRs.2.4 with JKH, Cargills (Ceylon) and Commercial Bank being the biggest contributors. JKH posted a turnover of SLRs.661mn which included two crossing amounting to approximately 2.2mn shares at SLRs.300.00 while the turnover generated by Cargills (Ceylon) amounted to SLRs.395mn which included two crossings of 1mn shares each at SLRs.195.00.

Hydro Power Free Lanka commenced trading on Thursday at a price of SLRs.15.50 with a total of 22.2mn shares traded between a price range of SLRs.15.00 and SLRs.16.00. the counter generated the day's largest turnover of SLRs.346mn.. SMB Leasing warrants also commenced trading during the day with the two warrants attached to voting and non voting shares opened at SLRs.0.40 and SLRs.0.20 respectively. Total turnover for the day amounted to SLRs.1.4 with ASPI closing down 48.80 points while more liquid MPI lost 54.13points.

Friday's total turnover of SLRs.1.7bn was dominated by JKH which posted a turnover of SLRs.701mn. This included a crossing of 2mn shares at SLRs.301.00 while the counter closed up SLRs.1.20 at SLRs.295.00. Brown & Company generated a turnover of SLRs.371mn which included a crossing of 1,307,700 shares at SLRs.260.00. Indices moved in the different directions with ASPI closing down 32.25points while MPI moved up marginally to close up by 7.59points.

According to the technical charts the indices are still languishing between the middle and lower Bollinger Bands as the gloomy market mood continues. RSI's of ASPI & MPI daily charts which fell to 40 levels are now edging towards the upper 30's due the oversold position of the market.

source - www.dailymirror.lk

LOLC wins ‘Diversified Group of Companies of the Year’ award

The highly sought-after blue chip bags four awards at National Business Excellence Awards 2010

Highly-diversified financial conglomerate, Lanka ORIX Leasing Company Plc (LOLC), was lauded at the National Business Excellence Awards 2010 held yesterday, 26 November.

At the event, LOLC won the coveted Gold for the ‘Diversified Group of Companies Sector’ whilst emerging runners up and second runners up in the Best ‘Capacity Builder’ and ‘Extra Large Sector’ categories respectively. LOLC’s associate company LOLC Leisure Ltd. was awarded Silver in the ‘Hospitality’ category for one of its hotels – Eden Resorts and Spa.

The National Business Excellence Awards is an annual award competition conducted by the National Chamber of Commerce of Sri Lanka (NCCSL) which recognises and celebrates the spirit of excellence amongst the local business enterprises.

Enterprises which have contributed to the socio-economic development of the country through its exemplary business practices are given the opportunity to display its business excellence at a national platform, whilst being further encouraged to climb the highest ladders of achievement.

Institutions that have demonstrated excellence in progress in areas such as business and financial performance, global reach, knowledge integration, technological investment, capacity building, performance management, corporate governance and corporate social responsibility are evaluated and adjudged by an esteemed specialised panel of judges.

At the previous year’s ceremony too, LOLC emerged winner in the ‘Specialised Banking Sector’ category in its very first participation of this prestigious competition.

Starting with humble beginnings, over the years LOLC has rapidly evolved into a highly respected, extremely dynamic and diversified group of companies in Sri Lanka. Progressing from being a pioneer Leasing and Factoring company, LOLC emerged a leader in providing innovative financial and non-financial solutions to people and sectors in different spheres of society.

At present, LOLC’s interests ranges from finance, agriculture, trading, construction, fisheries, transport, manufacturing, leisure, tourism, education, information technology, insurance, power and energy, project development, real estate, plantations to motor repairs and services.

Commenting on this significant achievement, Group Managing Director and CEO Kapila Jayawardena said: “Being recognised at the National Business Excellence Awards amongst many other respected peer-business enterprises is an honour in itself.  It reaffirms LOLC’s success story, whilst honouring the journey commenced 30 years ago. It is with the staunch commitment and passion with which the LOLC family has always contributed towards the company becoming a leader amongst the top corporates of the industry. I am indeed proud of their efforts. I also take this opportunity to commend the efforts taken by NCCSL to keep the spirit of national enterprise alive in Sri Lanka.”

source - www.ft.lk

Deals in JKH & Browns at premium to market Indices close in opposite directions, sentiment dull

The Colombo bourse closed the week yesterday with the indices in opposite directions – the All Share down 32.25 points (0.50%) and the Milanka up 7.59 points (0.11%) on a turnover of Rs.1.72 billion, up from the previous day’s Rs.1.44 billion, with 46 gainers against 100 losers.

Trades in JKH and Browns accounted for over a billion rupees of the day’s turnover with JKH seeing over 2.3 million shares traded between Rs.294.60 and Rs.296.70 closing Rs.1.20 up at Rs.295.

Brokers said that a crossing of 2 million shares at a price of Rs.301, a premium to market, accounted for bulk of JKH traded.

Browns, with over 1.4 million shares done between Rs.239.90 and Rs.247 closed Rs.1.30 up at Rs.245 with one crossing of 1.3 million shares concluded at a price of Rs.260 when the market was at Rs.240.

Brokers said that sentiment was dull with Environment Resource Investments (ERI), HNB, Central Finance, DFCC, Tokyo Cement and Commercial Bank among counters that posted gains and some volume.

Sampath was down Rs.1.50 to close at Rs.258 on 0.2 million shares done between Rs.258 and Rs.263 while ERI gained Rs.5.50 to close at Rs.77 on nearly 0.5 million shares.

LOLC lost Rs.2.60 to close at Rs.118 on over 0.2 million shares while HNB gained Rs.5 to close at Rs.402.90 on 68,500 shares and Central Finance was up 10 cents to close at Rs.725 on 34,800 shares. DFCC gained 50 cents to close at Rs.202 on 77,600 shares.

source - www.island.lk

Friday, November 26, 2010

Sri Lanka Hemas expects govt to honour power deals

Nov 26, 2010 (LBO) - Hemas Holdings group expects Sri Lanka's government to honour power purchase agreements with investors who set up private power plants and helped ward off power cuts despite talk of renegotiating them, a senior official said.

Hemas chief executive Husein Esufally said private power suppliers had not been officially informed the government wants to renegotiate the power purchase deals.

Minister of Power and Energy Champika Ranawaka has repeatedly made public pronouncements that the government will renegotiate deals with private thermal power suppliers to cut the costs of the loss-making state utility, Ceylon Electricity Board.

He has said the high cost thermal power plants will eventually be phased out as the government was switching to cheaper coal and considering nuclear power as well.

"We do not think the government will renege on these agreements," Esufally told LBO in an interview.

In the September 2010 quarter, the Hemas power subsidiary made the second biggest contribution to group profit. The unit has both a thermal power plant and several small hydro plants

Esufally declined to say what impact government moves to renegotiate the power deals would have on the group, saying it was speculative, but added:

"The role of independent power producers is not well understood. Today one of main reasons Sri Lanka does not have power cuts if because the IPPs played a very important role in Sri Lanka's energy story."
Power minister Ranawaka himself told a forum of exporters last week that Sri Lanka is the only country in the region without power cuts.

"Early entrepreneurs in this game who took the risk and went in and should really be rewarded but unfortunately are spoken of in very negative terms largely because early IPPs carried very high tariffs," Esufally said.

Esufally acknowledged that in future the government may not need the thermal plants because of the switch to coal but noted that if not for attractive tariffs offered initially private entrepreneurs may not have invested in power plants.

"There are very water tight agreements in place guaranteed by the state," he said referring to the PPAs. "The government on its own can't change them."

source - www.lbo.lk

Rocell to capitalise Rs. 554 m reserves

Boosting its share price the board of Royal Ceramics Plc yesterday resolved to capitalise reserves to the value of Rs. 554 million by way of an issue of new shares.

The basis of capitalisation will be one new share for every one held thereby issuing 55.394 million shares at Rs. 10 each. The current stated capital of RCL is Rs. 814.7 million which is part of its Rs. 2.36 billion equity.        
As at 30 September, it had retained earnings of Rs. 1.18 billion and reserves worth Rs. 366 million.               
The value of reserves to be capitalised would be on the basis of Rs. 350.4 million from revaluation reserve and Rs. 203.5 million from revenue reserve.

RCL said the move subject to regulatory and shareholder approval would satisfy the solvency test immediately after the capitalisation is made.

The announcement boosted the share price of RCL to high of Rs. 319 before closing at Rs. 310.90, up by Rs.15.90 or 5% from Wednesday. Deals on RCL created the second highest turnover of Rs. 214.5 million.
RCL in the first half of 2010/11 financial year achieved a net profit of Rs. 606.5 million, up by 114% compared with the corresponding period of the previous year.

source - www.ft.lk